Many
Vietnamese banks could report losses this year if interest rates are not cut as
expected to help them collect and settle bad debts, independent observers say.
The Ha Noi Building Commercial Joint Stock
Bank (Habubank) reported its unconsolidated business results for the fourth
quarter of 2011 with a loss of VND41.7 billion (US$2 million), becoming the
first loss-making bank in the period.
Under its unconsolidated financial report for
the fourth quarter of 2011, Habubank posted gross profits of VND76.57 billion
($3.6 million); however, in this quarter, the cost of setting up its credit
risk provisions rose 39.3 per cent to VND132.18 billion ($6.3 million), which
affected its net profit.
According to the report, its total pre-tax
profit in the fourth quarter of 2011 was VND55.61 billion ($2.6 million), and
the after-tax profit was VND41.7 billion. This compares to corresponding 2010
figures of VND81.05 billion ($3.9 million) and VND65.63 billion ($3.1 million).
Despite its fourth-quarter loss, the total
cumulative pre-tax profit of Habubank for 2011 was VND431.7 billion ($20.6
million), down 27.4 per cent against 2010. It's after tax profit for 2011 was
VND349.9 billion ($16.7 million), compared to VND482.02 billion ($23 million)
earned in 2010.
Habubank said that as of December 31, 2011,
its total outstanding loans stood at VND17.830 trillion ($849 million). Of
these, VND312 billion were subprime loans, two times higher than
at the end of 2010.
Its irrecoverable loans were estimated at
VND336 billion ($16 million), accounting for 4.7 per cent of the total loans.
Earlier, two other banks had reported losses
in the third quarter of 2011.
Nguyen Tri Hieu, a senior financial expert,
said banks reported losses in last months because their credit management was
not controlled closely. In addition, many borrowers, mainly enterprises, were
unable to pay back bank loans due to very high interest rates.
State Bank of Vietnam Governor Nguyen Van Binh
has said that bad debt in the Vietnamese banking system, as of late 2011, was
around 3.6-3.8 per cent of total loans.
Hieu told the Thoi Bao Kinh Doanh (Business
Times) newspaper that last year's bad debt was the result of several years of
doing business and did not arise only in 2011.
Before 2011, the banking sector recorded very
high credit growth rates, which averaged between 30 and 40 per cent annually.
Some banks even grew 100 per cent, Hieu said.
At this time, banks' credit growth was six or
seven times higher than the nation's gross domestic product (GDP), he added.
The typical risks faced by the banking sector
arise in three areas: credit, market and professional operation. However,
credit-related risks are considered to be the biggest challenge. In recent
years, most of the credit-related risks have come from loans injected into the
real estate sector.
One of the main reasons that caused losses for
the banks was that lending rates were too high (over 20 per cent per year).
Many enterprises, including big ones, cannot bear such a heavy financial
burden, so they have found it difficult to repay their loans, Hieu said.
At such high lending rates, many enterprises
have had to stop business, merge or default on interest payments, causing bad
debts to increase sharply.
To reduce bad debts, both deposit and lending
rates should be cut, he said, adding this was not an easy task because the
inflation rate remained high and the liquidity of many banks was still weak.
News Desk
Viet Nam News
Business & Investment Opportunities
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